My financial audit in July

Readers of the blog will know my financial plan where the cash flows are set up from passive income streams as well as active income through my Consultancy. It is important to audit these plans once in a while to see how they are going and if any course corrections are necessary. I had initially planned to do this quarterly, like most corporate organizations are required to do. However, a combination of my being caught up with my daughter’s admission in XLRI as well as some laziness on my part, has meant that I am now doing it for the first 4 months of the financial year, from April to July 2016.

My cash inflows at present are mainly through the sources below:-

  • Investment income in the form of dividends, interest and capital gains through redemption of FMP and other debt plans. In the four month period in question the contribution from this source was 48%.
  • My active income is largely from Consultancy. For this period the contribution from this source was 42% of my total income.
  • Rent from my Chennai apartment contributed the remaining 10% of my income.

My cash outflows for the same period were largely due to the following:-

  • Children’s education and other expenses constitute around 70% of my total expenses for this period.
  • Rent at 8.5% , Travel at 4.5% and Insurance at 4% are the other significant categories.
  • About 3% of cash outflows are due to new investments in this period.

It will be important to understand that the expenditure on the education of my children are atypical. I had spent a lot of time in thinking about how to structure the spending on the XLRI course for Rinki and came to the conclusion that I will fund the first year expenditure, while the second year can be through the bank loan. Ronju’s semester fees are typically in July and December. So, in effect the high proportion of spending in this area will remain for the current financial year.

The above also explains two other observations I made from the audit. Firstly, there is a cash deficit of about 1 lac which had to be funded through the amounts I had in my different SB accounts. This is fine as I was expecting the deficit to be a tad higher, given the extent of the college expenses. Secondly, it appears from the audit that almost nothing is being spent on other areas. This is explained by the high total expenditure which renders the percentages to be very low for most other categories such as Groceries, Household expenditure etc. This will, of course, change when the overall expenditure comes down after the college expenses are reduced.

The other aspect is that the college education expenses do have a separate fund for both my children, which is not part of my income. However, as a good accounting practice as well as to understand my overall financial situation better I have treated all of these as expenses rather than taking them out of the audit. Viewed from this angle, the deficit is notional though it helps me to stay grounded and realize that life through this year and next will still mean a fairly close watch on my finances.

On the investment front, my plans have gone well and I will write about this in another post. At the end of the day , the idea is to have a lifestyle which you desire, and I will look at this too in another post.

Purely from the cash flow perspective though, i am reasonably happy to see that my plans are working quite well. In the next 4 months the following are likely to happen:-

  • No fees for Ronju but for Rinki the Term 2 and Term 3 fees of XLRI will need to be paid. The overall amount will be less than what I paid in the current period.
  • We traveled a great deal in the current period and this may be a bit lower for the next 4 months.
  • Most of the insurance expenses are done for the financial year so this will reduce.
  • No significant changes are anticipated in the other expense categories.
  • Active income from Consultancy may see some increase in September time frame.
  • Investment income is likely to be along the same lines as the current period.

With all this I am hoping to get out of my deficit financing mode in the August to November period. Let us see if this works out.

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